Star Diamond Corporation Announces Year End Results

Press Release

March 28, 2019

Star Diamond Corporation (“DIAM”, “Star Diamond” or the “Company”) reports that the audited results of its operations for the year ended December 31, 2018 will be filed today on SEDAR and may be viewed at www.sedar.com once posted. A summary of key financial and operating results for the year is as follows:

Highlights

Announced the independent Preliminary Economic Assessment (“PEA”) on the Company’s 100% held Star and Orion South Kimberlites (the “Star – Orion South Diamond Project”, or “Project”): 66 million carats of diamonds could be recovered in a surface mine over a 38-year Project life:

o Base Case scenario (Model diamond price): Net Present Value (“NPV”) (7%) of $3.3 billion and an Internal Rate of Return (“IRR”) of 22% before taxes and royalties, and an after-taxes and royalties NPV (7%) of $2.0 billion with an IRR of 19% and payback period of 3.4 years after the commencement of diamond production;

o Case 1 scenario (High Model diamond price): NPV (7%) of $5.4 billion for an IRR of 32% before taxes and royalties

Announced environmental approval of the Project by the provincial Ministry of Environment;
Announced study results that indicate a high proportion of Type IIa diamonds present in both the Star (26.5 percent) and the Orion South (12.5 percent) kimberlites;
Announced technical updates on bulk sampling program of the Star and Orion South kimberlites by Rio Tinto Exploration Canada (”RTEC”);
Announced Brownfields exploration programs by RTEC on the Company’s 100% held Fort à la Corne kimberlites outside of the Star and Orion South kimberlites;
Working capital of $2.6 million at December 31, 2018;
Issued and outstanding shares of 392.1 million at December 31, 2018

Overview

Star Diamond Corporation is a Canadian natural resource company focused on exploring and developing Saskatchewan’s diamond resources. As a result of the 2017 mineral property consolidation and concurrent earn-in agreement with RTEC (see News Release dated June 23, 2017), the Company is now in an enhanced position to advance its 100% held Star – Orion South Diamond Project.

During 2018, the Company announced the positive results of the independent Preliminary Economic Assessment (“PEA”) on the Project. The PEA estimates that 66 million carats of diamonds could be recovered in a surface mine over a 38-year Project life, with a Net Present Value (“NPV”) (7%) of $ 2.0 billion after tax, an Internal Rate of Return (“IRR”) of 19% and an after-tax payback period of 3.4 years after the commencement of diamond production (see News Release dated April 16, 2018).

During the quarter ended December 31, 2018, the Saskatchewan Ministry of Environment (“Ministry”) approved the Company’s Star – Orion South Diamond Project (See News Release dated October 25, 2018). The Ministry indicated that they have conducted a thorough environmental assessment for the Project, including a detailed environmental impact statement, and carried out in-depth consultation prior to the decision to approve the Project. This included fulfilling the Province’s duty to consult with local First Nations and Métis communities. The Canadian Environmental Assessment Agency previously announced a positive Environmental Assessment Decision for the proposed Project by the federal Environment Minister (See News Release dated December 3, 2014).

Activities relating to the Star – Orion South Diamond Project and Fort à la Corne mineral properties

During 2018, RTEC, Bauer Maschinen GmbH (“Bauer”) and Nuna Logistics Limited finalized contractual arrangements for the manufacture, supply and operation of equipment to be used for bulk sampling of the Star and Orion South Kimberlites. RTEC aim to use a Bauer BC 50 Cutter mounted on a Bauer MC 128 Duty -cycle Crane (“Trench Cutter Sampling Rig”) to drill and sample to depths of up to 250 metres below surface (See News Release dated April 12, 2018). Each ten metres of advance down hole aims to excavate some 100 tonnes of kimberlite. Bauer cutter rigs are used around the world for complex engineering projects. Bauer has indicated that this will be the first time in the world that this technology will be used in an active project to reach a depth of 250 meters.

During 2018, RTEC and Consulmet (Pty) Ltd finalized contractual arrangements for the manufacture and supply of a 30 tonne per hour on-site bulk sample plant (See News Release dated May 15, 2018). The bulk sample plant has been specifically designed to maximize liberation and recovery of diamonds throughout the -25+0.85 millimetre size range, and minimize diamond breakage, particularly among potential specials (plus 10.8 carat diamonds) that may be recovered from both the Star and Orion South Kimberlites. The bulk sample plant will use a modern flow-sheet and the latest X-ray transmission (“XRT”) sorting technology to ensure any large diamonds present (up to 25 millimetres) are recovered with minimal breakage. A secondary crushing circuit, using a high pressure rolls crusher (“HPRC”), will maximize the liberation of smaller diamonds from the kimberlite.

During 2018, RTEC successfully completed panels at five of the proposed ten bulk sample locations on the Star Kimberlite, using the Cutter Soil Mixing (“CSM”) drilling rig (See News Release dated October 1, 2018). The CSM drilling program mixes cement grout with the top 20 metres of near-surface sands in order to stabilize the unconsolidated sand overburden at each of RTEC’s planned bulk sampling locations.

Prior to the commencement of winter shut down of the Trench Cutter Sampling Rig, RTEC commenced drilling of the first bulk sample hole on the Star Kimberlite using the Trench Cutter Sampling Rig. The Trench Cutter bulk sample drilling was successfully initiated to a depth of 37.1 metres below surface (See News Release dated November 1, 2018). The Trench Cutter Sampling Rig successfully excavated the sand and till overburden and returned a substantial proportion of large (up to 80 millimetre) fragments from the till. The encouraging performance of the Trench Cutter Sampling Rig was unfortunately constrained by the commissioning of the desanding plant, which did not operate at design capacity. The design and construction of the desanding plant are being evaluated by RTEC with the intent that the desanding plant will be revised or replaced by the time that the Trench Cutter Sampling Rig program resumes on the first bulk sample hole and RTEC’s on-site bulk sample processing plant is commissioned in 2019.

The Company recently announced that RTEC commenced the sonic and core drilling of up to 25 pilot holes each, on the Orion South Kimberlite (see News Release dated January 24, 2019). The sonic drilling is to provide a detailed log of the overburden stratigraphy above the kimberlite, while the core holes are being drilled to generate detailed logs of the kimberlite geology at each locality in preparation for RTEC’s proposed bulk sampling of the Orion South kimberlite with the Trench Cutter Sampling Rig.

RTEC is also performing Brownfields exploration programs to investigate and prioritise the Company’s Fort à la Corne kimberlites outside of the Star and Orion South kimberlites (see News Releases October 25, 2018 and November 9, 2018). While the Star and Orion South kimberlites are the focus of the planned bulk sampling by RTEC, respectively, there are some 60 other kimberlites within the Fort à la Corne diamond district, on mineral dispositions held 100 percent by Star Diamond. Star Diamond and other companies have previously completed extensive exploration on these Fort à la Corne kimberlites, including geophysical surveys, pattern core drilling,

large diameter drilling and micro- and macrodiamond analyses, which resulted in the documentation of geological models for a number of these bodies.

The Company recently announced the results of a study into the abundance of Type IIa diamonds in the diamond parcels recovered from the Star and Orion South Kimberlites (see News Release dated March 4, 2019). This study confirmed that unusually high proportions of Type IIa diamonds are present in both the Star (26.5 percent) and the Orion South (12.5 percent) kimberlites. Many high-value, top colour, large specials (greater than 10.8 carats) are Type IIa diamonds, including all ten of the largest known rough diamonds recovered worldwide.

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